[ANALYSIS] Intergovernmental relations and the Mandanas case

Michael Henry Ll. Yusingco, LL.M

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[ANALYSIS] Intergovernmental relations and the Mandanas case
How to end the deadlock between the national government and local governments over the Mandanas case decision, which expands the revenue base for towns and provinces?

The League of Provinces of the Philippines (LPP) has conveyed a formal appeal to President Rodrigo Duterte, seeking his “prudent intercession” in the implementation of the decision in the case of Mandanas vs. Ochoa.

This landmark decision significantly expands the revenue base from which the Internal Revenue Allotments (IRA) to local government units (LGUs) are computed. 

Henceforth, the national levies to be included in the computation of the IRA, which should now be called National Tax Allotment (NTA), would include the following: 

  • The national internal revenue taxes enumerated in Section 21 of the National Internal Revenue Code collected by the Bureau of Internal Revenue and the Bureau of Customs;
  • Tariff and customs duties collected by the Bureau of Customs;
  • 50% of the value-added taxes collected in the Bangsamoro Autonomous Region in Muslim Mindanao, and 30% of all other national tax collected in the Bangsamoro Autonomous Region in Muslim Mindanao;
  • 60% of the national taxes collected from the exploitation and development of the national wealth;
  • 85% of the excise taxes collected from locally manufactured Virginia and other tobacco products;
  • The entire 50% of the national taxes collected under Sections 106, 108 and 116 of the NIRC as provided under Section 283 of the NIRC; and
  • 5% of the 25% franchise taxes given to the National Government under Section 6 of Republic Act No. 6631 and Section 8 of Republic Act No. 6632.

Under this new regime, the NTA will obviously be a significant windfall for LGUs.

Hence, it is easy to understand why the LPP wants President Duterte to facilitate the release of the NTA this year, contradicting the suggestion of the administration’s economic team to implement the Mandanas decision in 2022. 

The central government’s position was explained by Presidential Spokesman Salvador Panelo this way: “Due to the various commitments of the President to the people, such as the implementation of programs designed to combat crime and corruption, as well as activities of the national government to promote human development and poverty reduction, to name a few, it was agreed that the adjustment of the IRA may not be feasibly effected during this administration.”

Ironically, the LPP reached out directly to the President for the immediate release of the NTA reasoning that, “LGUs need the additional resources now under your administration, more so with the implementation of the Universal Health Care as well as with your other priority programs.”

So, the central government and the LGUs are palpably at loggerheads here, with both using the desire to help the President to justify their claim to the Mandanas money. 

Core issue

But this impasse on when to implement the decision unravels a deeper pathology in the current decentralization arrangement in the Philippines, which is the fact that there is no unequivocal allocation of responsibilities between the central government and LGUs.

The prevailing local autonomy framework allows the national government and LGUs to simultaneously assert responsibility over certain public service deliverables. Consequently, permitting both levels of government to make legitimate claims to the national coffers to fund efforts that basically deliver the same services.

Accordingly, the “funds follow the function” rule in public fiscal administration cannot be applied in resolving the Mandanas stalemate. In fact, defining the respective competencies of the central government and the different levels of LGUs is a long-term solution for it requires amending the Administrative Code and the Local Government Code. 

Obviously, improving the current decentralization structure via legislative reform must still be pursued by Congress independent of the political stoush concerning the Mandanas case.

End deadlock

But there is another option that can lead to the immediate resolution of the deadlock and this is a resort to the principle of Intergovernmental Relations or IGR.

IGR is explained in academic literature as fundamentally the coming together of different orders of governments within a political system, through formal or informal processes, to work towards the achievement of common goals. 

IGR mechanisms are utilized to avoid redundancies, duplication, unreasonable fragmentation and ineffective amalgamation in both the policymaking process and in the delivery of public services.  Hence, IGR is now considered an integral component of good governance. 

The concept of IGR is traditionally associated with federal systems. IGR processes have been described as the “lifeblood of federalism in practice.” But many scholars maintain that IGR mechanisms can and do play a key function in unitary systems with embedded decentralization arrangements such as the Philippines. 

The fact is the growing complexity of public mandates means that different levels of government are now mutually dependent in many regards. And as the demands of modern governance intensify, having a deeper understanding of the fundamentals of IGR has become extremely important for a state with a multilevel system of government.

Such caveat is particularly more urgent for the Philippines because cooperation and collaboration by and between the central government and LGUs have yet to be instinctively and consistently practiced.

Building consensus

Nevertheless, the prospects of resorting to IGR in resolving the Mandanas impasse is high.

And the reason for this because the LPP ultimately concedes that “both national and local governments share the common objective to ensure compliance with the Constitutional provision guaranteeing the just share of LGUs in all national taxes without necessarily disrupting the fiscal and deficit targets of the country and thereby maintain macroeconomic stability.” 

More importantly, the group is very open to explore options to arrive at a mutually beneficial solution.  And a willingness to dialogue expressed by the LPP opens the possibility of the President organizing and presiding over a roundtable discussion with local chief executives and pertinent members of his Cabinet to find alignment and cohesion in implementing the Mandanas decision. 

An approach anchored on consensus-building will not only significantly increase the chances of resolving the deadlock, but it can also herald more cooperation and collaboration between the central government and LGUs under the Duterte administration.

More critically, the proper use of IGR moving forward will definitely complement efforts by Congress to reform the current local autonomy framework. – Rappler.com 


Michael Henry Ll. Yusingco, LL.M is a non-resident research fellow at the Ateneo Policy Center of the Ateneo School of Government.







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